The supermarket war heats up the multiples' approach to media, too

Whilst the multiples’ reductions in media spend could mean everything is going into price, in practice significant monies are still being invested in driving us to our favourite store…

Essentially, Media Week reports that during the recession of 2008-2009, traditional grocers were among the best advertisers as consumers continued to buy food while cutting back elsewhere. But that has changed in that Asda, Tesco and Morrisons have collectively cut spend on press, TV, outdoor, radio and cinema by nearly £100m, or about a third, since 2011, according to Nielsen – although some of that has gone into online.

Meanwhile, Sainsbury’s doing better financially, increased its spend by 2% to £59m (More details in the Media Week article)

All of this highlights the fact that the mults are competing with one another on price for a diminishing share of the action, and need to do so via differentiation - own label - and increasingly instore via the shopping experience.

This has to represent opportunities for suppliers that are capable of, and prepared to service regional and even store-based assortments, tailored to local need, and optimised via tailored shopper-marketing initiatives…

Finally, the main causes of it all, those ‘downmarket, common, limited-choice upstarts’ Aldi boosted ad expenditure by 160% to £69m from £26m and Lidl by 275% to £83m from £22m.

A message for your marketing colleagues?
Given that any growth is being driven by Multiples own label and Discounters’ surrogate brands, it is vital that your marketing colleagues increase brand alignment with retail offer-communication, while you find non-compromising ways into Aldi and Lidl…

Tailoring your brand portfolio to new retail realities...

As the multiples struggle to adjust to the consumer's shift to smaller, cheaper, faster, closer, more convenient and online shopping by selling surplus outlets and trying to manage lower productivity caused by redundant space in their estates by culling SKUs, the consequences for brands are hopefully obvious.

In other words, with less shelf space available, only strong brands can maintain their facings, unless you can prove otherwise....

Moreover, brands are further threatened by the fact that much of the multiples' growth is via private label (if in any doubt, why not dig into your in-house Kantar data?), and discounters' via surrogate labels.., all adding to the need for new retail strategies..

In the face of these 'permanent' market changes, it follows that branded suppliers need to re-set what may be a pre-2008 approach by re-evaluating the relative appeal of their brand portfolios to suit current retail realities.

Essentially, this means fundamentally re-assessing consumer appeal, by brand, by retailer, vs. available competition to ensure each SKU of each brand has a defensible rationale to justify its on-shelf presence in each of the multiples.

In practice, this will mean you will have a different brand portfolio for each of the multiples, with possible regional variations to match local need.

Finally, any of your brands that do not meet these criteria should be diverted to other channels, before the multiples do it on your behalf...  

Guest Blog: Riding Two Horses – Managing a Mixed Business For Success by Richard Nall

It is the eternal conundrum for many CPG suppliers:  Should we ‘get into’, or stay in, Own Label?

With core customers losing share (e.g. to grocery discounters), and lean manufacturing techniques releasing capacity year after year, organisations face a constant battle to fill their factories.  Other solutions, such as exporting, take time to research, and appointing the right distributor can be fraught with difficulties; whilst M&A can exacerbate the problem (and concurrently release second hand kit for sale following manufacturing rationalisation, inadvertently creating a new competitor).

Superficially, it can seem attractive to fill capacity with own label but if that is as far as your thinking goes, then stay with your knitting.  I suggest that you think carefully how you will ride both horses, both today and tomorrow.  Is the problem that your and your competitors’ brands are not distinctive enough, or are your innovation efforts too weak?  For many, these might be improved, so this should be your immediate focus.

If you still believe that your future lies in own label then start with a mental re-positioning.  Think Retail Brand or Customer Brand.  Successful firms treat customers’ brands as their own with concomitant levels of brand development and innovation resource.  The only outwardly visible difference should be the lack of dialogue investment for the latter.  Start with a crystal clear category vision, defining consumer and shopper growth drivers, followed by a hard-edged discussion as to portfolio roles, and expected levels of financial and organisational benefit and resource requirement.

You might ask yourselves some questions such as:  Why would competing in retail brand be a good thing?  What is their role in driving category sales and profit?  With which retailer(s) do we want to work?  What value would we add?  How can we differentiate from our proprietary brands?  How do we sustain those differences?  What financial and organisational benefits will it bring?  What rules need laying down?

An answer to these questions might look like:  “Competing in Customer Brands allows us to drive category growth, and compete against Brand(s) X (Y and Z) with a diverse portfolio differentiated between the core category drivers.  We will focus Brands A & B on Drivers M & N and develop our customer brand portfolio against Drivers P and Q where Brand(s) X (Y and Z) are strongest.  Our category insight and operational capabilities set us apart so that we will make superior profits vs customer brand competitors.”

“We will earn scale benefits - procurement, manufacturing, distribution and trading - enhancing cash flow and shareholder returns.  This will provide opportunity for increased investment in our branded portfolio.  Net, we will fix our competitors with customer brands, gaining freedom of action to grow our branded business.  Through learning how to be effective retail brand developers, we will create a more agile organisation that operates with significantly greater urgency than today.”

It might sound good but you need to consider, make and stick to some hard decisions re: key practicalities:  How do we ensure our brand development stream remains a core priority and is not disrupted by short-term customer demands?  How will we prioritise resource bottlenecks?  How do we retain corporate enthusiasm for proprietary brands against customer brands?  What IP will we allocate to Customer Brand innovation, if any?  What are our ‘lines in the sand’, and are we REALLY prepared to enforce them?

If you think some of this might be nit-picking, think again.  They are critical issues our clients face daily.  Time and again, we have seen Leadership Teams, and particularly the CEO/MD, inadequately articulate and police their expectations here.  The consequence?  Resource and innovation that should sustain proprietary brands is diverted onto customer ranges.  Over time, the brand stumbles, becoming less important to the manufacturer and customer who is (usually) earning better margins on their own products.  The long-term outcome is invariably commoditisation and category stagnation as insight & discovery, true innovation, and dialogue investment decreases with marketing expenditure switched to customers to prop up sales.

So if this is a live issue for you, or you are already riding both horses, pause and reflect upon the strategic choices you are making, and ensure that your organisation (particularly your sales and innovation teams) fully understands what they are, what they mean, that they buy into them, and, critically, that they abide by them.

Richard Nall - richard@brandgarden.co.uk

Tesco Soft Drinks Supply Aggregation - another type of Cull?

Refresco Gerber’s recent deal with Tesco to produce all of its own label Soft Drinks could be an effective way to rationalise Tesco’s part of the  carbonated and non-carbonated Soft Drinks category.

It could also be a new approach to Tesco's management of some categories...

With little or no axe to grind, this move to a single producer will simplify the elimination of product overlap and products with peripheral advantages, in one stroke….

All products could be produced in harmony, reflect scale economies and allow new product introductions that will fit with a co-ordinated optimisation of the ENTIRE category, an ideal blend of brand and private label, tailored to the needs of Tesco shoppers - the ultimate in category management?

In which case, could it be time for suppliers in other categories to consider the extent to which all/most of the Tesco own label products in their category could be similarly aggregated under one branded/own label supplier?

If so, might it not be an opportunity for a brand-only supplier to dilute their principles and actually pitch for the Tesco own label business in their category?

...and if you don’t, who will?